Unearned premiums are only portions of the premiums, paid by the policy holders, that are then collected by the insurance provider in advance that are subject to be returned to the client once the coverage ends earlier before the term covered by the policy and when the premium is complete. Unearned premium may be given back to the insured if the item of the insured proclaims to be a total loss and the coverage on that particular item is necessary. It may also be returned if the provider opts to cancel the whole coverage due to some reasons.
For instance, a refund of the unearned premium associated to auto insurance policy. Once the client paid the imposed premium in advance for one year, and unfortunately encounters a total damage and destruction of the vehicle four months after the payment has been made, there is a good possibility that the insurance company may return around two-thirds of the prepaid premium. The company will only keep the portion of the yearly premium that includes the whole coverage that is provided.
However, it is significant to take note of the different provisions stated in the insurance contract that regulates the terms associated to the return of unearned premium. Those written provisions should go along with the laws and regulations mandated in the area where the agreed coverage is provided. Depending on the laws practiced and applied in a given state or country, a specific standard formula in computing for the unearned insurance premium may be needed.
Insurance companies are not likely to give back any portion of the unearned premium if the policyholder opts to end and terminate the coverage without any valid reason or for reasons of transferring to another insurance provider with the same policy. For this reason, several people would choose to wait for the right time until the coverage of the last premium is almost over before switching for another company to avail a health, life and other forms of insurance policies. However, it the policyholder’s party could prove the insurance provider failed to provide and honor the agreed terms and conditions written and imposed in the provisions of the insurance policy, a good possibility is that the unused portion of the premium may be refunded back to the policyholder.
This is the main reason why most individuals who would want to avail an insurance policy is advised to search for the best companies that offer good provisions including their terms and conditions since different companies have different policies which may or may not include some major aspects and advantages. In order to make sure that you are getting the most of your investment in an insurance policy, you may need to ask for help on an insurance agent and broker to explain to you what would be the best insurance to cater for your needs. It is important also that you ask questions about the premium rates and the rules governing towards unearned premium.